Early Medicaid Expansion Associated With Reduced Payday Borrowing in California

In Health Affairs, Heidi Allen and colleagues, including Ashley Swanson, analyzed the impact of California’s early Medicaid expansion under the Affordable Care Act (ACA) on the use of payday loans, a form of high-interest borrowing often used by low- and middle-income households. No studies to date have focused on how health insurance coverage affects the use of alternative financial products. This research is especially important given the documented relationship between poverty, medical debt, and bad credit outcomes.

Using a difference-in-differences research design, the authors assessed the effect of the expansion on payday borrowing, comparing trends in early-expansion counties in California to those in counties nationwide that did not expand early. Early Medicaid expansion was associated with an 11 percent reduction in the number of loans taken out each month. It also reduced the number of unique borrowers each month and the amount of payday loan debt. The researchers were unable to determine precisely how and for whom the expansion reduced payday borrowing; nonetheless, the results suggest that Medicaid reduced the demand for high-interest loans and improved the financial health of American families.